Gold Premium Surges In China - Wise ‘Aunties’ And Wealthy Buying

GoldCore's picture

Today’s AM fix was USD 1,405.25, EUR 1,074.68 and GBP 918.64 per ounce.

Yesterday’s AM fix was USD 1,396.75, EUR 1,072.61 and GBP 915.00per ounce.

Gold climbed $27.10 or 1.96% yesterday to $1,412.00/oz and silver also gained 2.57%.

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Bloomberg Chart of Day (June 3, 2013)

Gold inched down today after yesterday’s 2% gain. Gold was higher in Australian dollars after the Aussie dollar fell on concerns about the Australian economy.

Monday’s economic data showed U.S. manufacturing activity had slowed to the lowest level in almost 4 years. The still fragile nature of the U.S. economy will support gold.

Poor economic data is confusing the bulls who continue to under estimate risk. The monthly nonfarm payrolls figures out on Friday will give further guidance regarding whether the U.S. is tipping into recession.

Deutsche Bank has recommended buying gold in Japanese yen and Australian dollars. 

The bank cites the significant increase in Japan’s balance sheet as likely to cause the yen to weaken further and says the Australian dollar is overvalued.

While gold in yen is down just 3.6% in 2013, in the last 12 months the yen has fallen by 10.1% against gold showing gold’s importance as a hedge against currency devaluations. 

As long as the world's economy remains in tatters then safe havens will be few and far between. 

While gold’s safe haven credentials have taken a bit of a battering of late, they will again prove themselves over the long term.

The banking crisis in Cyprus has shown that even bank deposits are not safe and globally there are plans for so called ‘bail ins’ or deposit confiscation for banks that become insolvent.

Cross Currency Table – (Bloomberg)

The premium gold buyers in China are willing to pay to take immediate delivery of gold, as bullion jumped four-fold in April after prices fell sharply.

Store of wealth buyers thronged jewellery stores and bullion brokers in China in order to buy gold jewellery, coins and bars.  

Photos of Chinese “aunties,” a term of respect for older women, clearing shelves in goldsmith shops made headlines in government media such as the People’s Daily and millions of Weibo microblog accounts after the 14% plunge in prices in the two days through April 15. 

The biggest such drop since 1983 was seen as an unprecedented opportunity by some, which prompted fabricators to replenish inventory by taking delivery on the Shanghai bourse.

The Bloomberg CHART OF THE DAY (above) shows that in the 12 months through April 12, before the rout, gold for immediate delivery in China traded at an average premium of $7.22 an ounce to the prevailing London counterpart, according to Shanghai Gold Exchange data. 

The premium has averaged $32 an ounce since mid-April, as physical demand surged, and was at $17.15 at 2:17 p.m. in Shanghai. 

“Premium is a function of demand and supply, and right now you could interpret the high premium in Shanghai as a sweetener to entice the overseas gold supply to flow into China,” Qu Mingyu, a trader at Bank of China Ltd. in Shanghai said on May 24. 

Even before the mid-April price drop, China’s gold imports jumped to a record in the first quarter, according to official data, and probably rose further through May, Qu said.

China’s output of 403 metric tons in 2012 made it the world’s largest producer for a sixth straight year, according to the China Gold Association. Domestic demand was 776 tons last year, which outpaced supply and spurred imports, according to the World Gold Council.

Gold $/oz, 5 Years, Daily - (Bloomberg)

The store of wealth demand is not just from Chinese ‘aunties.’ There remains an under estimation of the demand coming from wealthy Chinese and high net worth and ultra high net worth individuals (HNWs and UHNWs). 

This has not been commented upon or analysed but we have direct experience of wealthy Chinese people looking to store gold in Hong Kong and Switzerland, as have other storage providers.

Given the significant cultural affinity for gold in China, there is likely to be sizeable demand from wealthy Chinese people looking to diversify and protect their new found wealth. 

To characterise Chinese demand for physical gold as solely from “aunties” is to simplify Chinese demand. Indeed, besides Chinese people buying gold, Chinese companies and of course the official sector and the People’s Bank of China are also likely accumulating gold.

The significant broad based demand for gold in Asia, and particularly from India and China, continues to be ignored and under estimated by gold bears such as Nouriel Roubini.

Gold Holds Advance After Climbing Most in Two Weeks on Stimulus - Bloomberg

Gold futures slip, but hold $1,400 level – Market Watch

Gold supported as soft US data rekindles stimulus hopes - Reuters

India imported around 162 tonnes of gold in May - Reuters

This Is A Great Time To Buy Gold – Business Insider

Gold futures trading data resembles setup for rally – Got Gold Report

Nationalized ABN Amro offers fool’s gold – Jacob Schipper

Roubini As Right On Gold As On Predicted Stock Market Crash? - GoldSeek

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Hongcha's picture

What do they want from the United States?  Well among them are ...

1.   Vitamins, supplements;

2.   Burt's Bees products, esp. the salve for mosquito bites;

3.   Avocadoes, powdered milk.

Temporalist's picture

June 4 (Bloomberg) -- In today's "Global Outlook," Bloomberg's David Ingles takes a look at China's gold rush.

Gold Premium Surges in China as ‘Aunties’ Buy


Oh no it's not just gold "propagandists" saying it!

OutLookingIn's picture

Just "facts" please?

And NOT the ones from CNN, CNBC, FOX, etc.etc.

Do your own digging! Just don't take "GoldCores" article at face truth.

What you will find is indeed true. Two gold prices are coming to light.

First we have the "gold price" which you will pay to own GLD or futures etc.

Then we have the "price of gold" which you will pay up front to physically own an ounce of gold metal.

The difference being is that you will have to pony up a little more fiat to own the real thing, versus more paper.  

Zero Govt's picture

GoldCore, or 'Bullion' and 'Banks' are another 2 very simiiar words this propagandists, sorry journalists, pieces with a pinch of salt ...make it half a truck load!

if BullionBank, sorry GoldCore, scours (scrapes?) the world for a scrap of news to say people are buying then you do some selling ...wait til GoldenBollocks says it's "bleak, bleak, bleak" out there, then ya buy

sculptor's picture

I'm going to china to visit Mother-in- law and my wifes 4 sisters "what do you want from USA?  all 5: can you get gold?

if that was the case on the street in USA, where everyone was wanting it, crazy for it, waiting on line for it,....I'd say it was time to sell into the craze.

A. Magnus's picture

Would like like some cheese to go with that whine? For fuck's sake, you would think people would be GRATEFUL about having different economic factors explained but NOOOOOOOO, some gotta whine and bitch and advertise to the entire freaking world the extent of their mangina clitoris pains!

There is no helping some people...

MacroAndCheese's picture

Here we go again, yet another infomercial from a gold merchant.  McDonalds is bullish on burgers, Coke is bullish on soda, and GoldCore is bullish on gold.


Who knew?

fijisailor's picture

OK so it's an infomercial but is it true or not true?  Everyone is a special interest.

bank guy in Brussels's picture

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